Final Report - European Commission - Europa

Chapter 1 Relevance of the strategy 13
Country Strategy 1996-1999
In August 1995, the Commission produced a Country Strategy Paper (CSP) for Albania,
which in turn led to a Multi-Annual Indicative Programme (MIP) for Albania in May 1996.
The CSP describes Albania’s “remarkable progress” but states that stabilisation remains
fragile; the main obstacles to progress are identified as the poor state of infrastructure, the
financial sector, and the legal and regulatory framework. The MIP repeats the country
analysis of the CSP, and proposes a programme focused in three areas:
• “development of the domestic productive base” (including agriculture, SME
development, transport, banking and finance, tourism, etc.)’
• “human and natural resource management”, including labour market, education, health,
local community development, water infrastructure and the environment; and
• the “European Dimension”, including public administration, local government,
approximation of legislation, public agencies, public awareness, aid coordination,
judiciary, and civil society.
The indicative allocations were of 140 Mecu was divided 45 percent, 43 percent and 12
percent respectively. There is general discussion about the need to develop closer links with
the EU, and to harmonise Albanian structures and laws, although there is very little about how
this is actually to be achieved in practice.
The country analysis contained in both papers is reasonably comprehensive, but superficial.
The most notable point is the lack of any reference to the danger to financial sector stability
arising from the pyramid schemes. This is particularly surprising given that by the time of the
MIP this danger was becoming clearly evident: interest rates were rising sharply, the nature of
the schemes was being reported in the international press, the World Bank had suspended
financial sector lending, and the IMF and World Bank were making urgent representations to
the government. 25 Even more importantly – although more understandable, given that other
observers also largely failed to appreciate this – the documents have very little to say about
the social and political context that allowed the collapse of the pyramid schemes to translate
into a much more generalised political crisis and breakdown of civil order.
While there is some recognition of the institutional weakness of the Albanian administration,
the implications of this for the implementation of the proposed programme are not seriously
considered; nor is the weakness of the Commission itself. In addition, the serious lack of
realism implied by proposing a major programme of EU harmonisation of structures, laws
and standards in a country virtually without a functioning public administration is astonishing.
In any case, the result is that the programme – which, as the list above shows, would have
been extremely ambitious even if the Commission had been very efficient, and Albania had
possessed a relatively benign implementation environment – was not realistic at all.
After 1997 – the Phare Concept Paper
The events of 1997 led to a radical reassessment on the part of donors of their role in Albania.
This reassessment, quite rightly, involved considerable soul-searching. As the World Bank
put it: “What had gone wrong? Were IDA and the other donors blinded by the very good traditional macro-
25
See “Albania: Country Assistance Evaluation”, World Bank, November 16, 2000, for a
description of donor actions in the months preceding the 1997 crisis.